VersaBank Kicks Off Tokenized Dollar Deposit Pilot Using Algorand, Ethereum and Stellar

VersaBank, a Canadian digital financial institution with a deal with enterprise shoppers, has began testing a tokenized deposit that the financial institution says present a safer and extra compliant various to stablecoins.

The pilot, run by means of the financial institution’s U.S. subsidiary VersaBank USA, will trial a U.S. greenback model of the financial institution’s blockchain-based Digital Deposit Receipts (DDRs) tech. Each token, branded USDVB, represents one U.S. greenback held on deposit at VersaBank USA.

The program will simulate 1000’s of transactions of small worth, first internally and then with choose exterior companions. Tokens shall be managed by means of the financial institution’s digital vault and e-wallet platforms and issued on the Ethereum ETH$4,542.44, Algorand ALGO$0.2498 and Stellar XLM$0.3809 blockchains.

While stablecoins, crypto tokens with costs tied to fiat currencies just like the U.S. greenback, have captured a lot of the consideration, banks are additionally exploring tokenized deposits to make cash transfers extra environment friendly utilizing blockchain rails. A stablecoin, like Circle’s USDC or Tether’s USDT, is often issued by a personal firm and backs the tokens’ worth with reserves held at a third-party custodian. Meanwhile, a tokenized deposit is a legal responsibility of a regulated financial institution and topic to banking guidelines.

Earlier this 12 months, Custodia and Vantage Bank tokenized U.S. greenback demand deposits on Ethereum, whereas JPMorgan examined its deposit token on Coinbase’s layer-2 community Base.

Unlike most stablecoins, VersaBank stated its tokens are federally insured and can earn curiosity, making them functionally just like conventional deposits however with the added effectivity of blockchain-based settlement.

The financial institution stated it expects to complete the pilot by the top of 2025 and will search approval from the Office of the Comptroller of the Currency (OCC) earlier than any public launch.

Read extra: Stablecoins, Tokenization Put Pressure on Money Market Funds: Bank of America